Please help me figure out capital gains.

Let's say that I bought 10 shares at $100/share with a cost basis of $1,000 and when it went up to $200/share after 3 months, I sold it for $2,000. Now I have a $1,000 short term capital gain.

Now suppose that the stock drops to $150 and I invest $1,500. Does this change the capital gain amount in any way? IOW, will I be taxed on the entire $1,000 or will it only be only $500?

  • The second purchase event is utterly unrelated and does not change the first buy-sell trade. – Fattie Jul 21 '20 at 0:50

No, you made a gain on your sale of $1000, and that is what you are taxed on.

The new shares you bought later won’t affect your taxes until you sell them.

Caveat: if your sale had been for a loss rather than a gain, then purchasing other shares within 30 days, before or after the sale, could affect your ability to take the loss on your taxes in the current tax year, due to the “wash sale” rules.

will I be taxed on the entire $1,000 or will it only be only $500?

Buying the new shares at $1500 didn't cause you to lose any money. Presumably you still have the other $500 in your bank account, or you spent it on something (neither of which scenarios would allow you to reduce your taxes).

  • @BobBaerker, I rolled back your edit mainly because you removed the part where I actually answered the question (i.e. the initial "no"). I appreciate you gave further information about the wash sale, but that is only an aside here, not part of what the OP actually asked. – The Photon Jul 19 '20 at 21:59
  • 2
    The phrase "affect your ability to take the loss on your taxes" is a bit loose. It could lead a reader to infer that one could lose the deduction rather than have to defer the deduction, hence the reason that I edited your answer. However, it's your answer and you have the right to roll an edit back, so be it as you wish. LOL. Your second edit has now added further information which is irrelevant as well. – Bob Baerker Jul 19 '20 at 22:11

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